18 Oct 2018
Farm expansion ‘not the answer’ to surviving volatility in dairy sector
Be careful how you expand your business, as economies of scale may not be the answer to surviving the volatility in the dairy sector.
Alex Black
That was the warning from Anderson’s Mike Houghton, speaking about his Trehane Trust fellowship at the RABDF event.
“I visited a farm in Wisconsin with 8,600 cows on site and they employ 86 people. That is still 100 cows per man,” he said.
“Farmers have got to understand if expansion will actually create economies of scale.”
Risks
He added there were risks from larger farms including the impact biosecurity problems could pose.
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Instead, he said success would be found by understanding costs and if farmers could improve their production from forage it would give their balance sheets a big boost.
He added it was interesting to see processors introducing measures to tackle volatility, but producers needed to understand whether their profit would be enough to cover debt reduction, tax and provide drawings.
Mr Houghton also called on processors to be more transparent saying there was currently ‘little or no feedback’ from the big players when it came to production.
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